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Gartner forecasts challenges for Cisco

Cisco Systems Inc.'s second-quarter profit almost doubled, but shares fell as sales missed analysts' estimates. Is it a minor bump in the road for the networking giant, or a sign of struggles to come?

Rachna Ahlawat, principal analyst with the Stamford, Conn.-based Gartner Inc., recently co-authored a research report reviewing the state of Cisco. Ahlawat spoke with about the report's findings, the current state of Cisco and where its future is headed.

Is Cisco increasing or losing its lead in the enterprise networking market?
Cisco has increased its lead a few percentage points because of their market share, but it's not significant. For example, in the switch space, they have gone from 65% to 67%. But they fluctuate so much that we cannot say it's significant. In other words, it's been flat and they have maintained their position. More than 80% of worldwide Internet traffic passes through Cisco devices. Where do you see that percentage in 10 years?
Cisco has about 65% of the market outside of North America, which means Cisco has gained significant traction in the service provider market in the last couple of years. Cisco still has 80% on the North American market share because they were the first to come out with those products, but I see the competition continuing to put up a good fight in the future as this has proved to be a challenging market for Cisco.

If you have many network backbones dependent on Cisco, that equivocates to be a prime target for hackers.
Rachna Ahlawat,
With so much Cisco gear in the field, is Cisco becoming a target for malicious hackers?
Not unlike Microsoft, this is becoming true for Cisco. Most hackers target Microsoft because it is a widespread platform, which means they can hurt the maximum amount of users. Similarly, if you have many network backbones dependent on Cisco, that equivocates to be a prime target for hackers as well. What's the state of the vendor's voice strategy, and in general should it be considered alongside Nortel and Avaya?
When it comes to its product feature set for voice, Cisco is slightly weaker. But Nortel and Avaya together don't have the kind of share that Cisco has on the data networking side. If enterprises start looking for bundled offerings of voice and data, and Cisco has excellent data offerings, they will be able to sell voice. If the dual environment from the enterprise customer doesn't come together, then Nortel and Avaya would be better choices for voice. What will be the short-term and long-term effects of Cisco's Airespace acquisition?
Cisco's purchase of Airespace is more to satisfy the requirements on the small to medium-sized networks. Cisco already had large environments covered, but they saw room for improvement in the medium-sized enterprise wireless switch space. The primary short-term effect is being able to offer one product into medium-sized enterprises. We will see a long-term impact of this acquisition as Cisco integrates the Airespace product to eventually develop its own improved product.

For more information

Read our exclusive on Cisco's Airespace acquisition.

Learn more about deploying Cisco VoIP networks.

Do you think Cisco will reduce equipment prices across the board this year to better compete with other vendors?
Overall in the industry, prices have been coming down. For example, in Internet switching, prices have dropped by almost 15%-20% every year and that is for some of the newer technologies. Cisco has an increasingly unique portfolio, and no other vendor can provide all that Cisco does today. So Cisco really doesn't play that much on price, and I think they will continue to hold true to that as they mainly play on being a one-stop-shop for all your networking needs. What new strategies should Cisco's run-of-the-mill router and switch customers be aware of?
This year will be the year of management. Network management, at least from the wireless side, is going to be something that companies and other vendors concentrate on. Next year is going to be the year that wired and wireless networking come together. We will see the integration of one product offering wired and wireless LAN.

Customers should be aware of all the different management platforms that are coming together, how that affects hardware on the switched wired and wireless networking, and the security that's safeguarding it all.

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